Abstract
Welcome to this autumn edition of the Journal of General Management! This edition compiles four papers related to general management and leadership.
Drs Edelbroek, Biomme and Peters investigate how employees’ work engagement influences the relationships between transactional and transformational leadership on the quality of the open innovation process. Viewed as an organization process, innovation spans across internal departments as well as external collaborations. This open innovation perspective offers managers a better picture of innovation process combining internal and external market challenges to advance discovery of new ideas. The study examines whether managers who exercise transactional leadership or transformational leadership can extrinsically or intrinsically motivate their employees to engage in open innovation processes. Managers who support employees’ work engagement can enhance employees’ belief in their capabilities and their capacity to organize and generate creative work solutions. The study hypothesizes that transactional leadership and transformational leadership affect employees’ perceptions of the quality of the open innovation process. Based on a survey of employee perceptions and their leadership experiences, reward-focused transactional leadership style does not necessarily have a positive effect on the quality of the open innovation process. In contrast, employees perceived transformational leaders to have a positive effect on the quality of the open innovation process. Consistent with transformational leaderships, work engagement is positively associated with the quality of the open innovation process as perceived by employees. Managers can stimulate creativity and innovative thinking through transformational leadership. It is possible that autonomy from transformational leadership is positively linked to the perceived quality of the open innovation process.
Dr Konduk’s study examines how consistent and inconsistent performance feedback affects managers’ aspiration levels in the context of a European grocery retailer with multiple stores. The study focuses on performance feedback consistency in the adjustment of aspiration levels, as managers frequently grapple with inconsistent performance feedback and use different benchmarks. The study explores the importance of past aspiration level, attainment discrepancy and social comparison in terms of their positive influence on achieving consistent performance feedback. Research on aspiration levels has mainly investigated financial and non-financial aspirations rather than historical and social aspiration levels. In particular, previous studies have not only overlooked the possibility of inconsistent performance feedback but also examined it using different performance benchmarks. For managers, inconsistent performance feedback can hamper their ability to learn from it as well as to set relevant aspiration levels. By examining how the impact of social comparison differs across the cases of consistent and inconsistent feedback, the study reconciles its mixed effects to test the importance of consistent attainment discrepancy and social comparison for the current aspiration level. According to the study, managers should focus on setting feasible aspiration levels and avoid high aspiration levels in the form of ‘stretch’ goals. Managers should not compare a unit to a more successful comparable unit to produce change via the resulting unsatisfactory performance. From a leader–follower perspective, managers can develop customized aspiration levels for followers to remain above their actual performance levels.
The study by Dr Tabesh and his colleagues explores how managers choose to solve problems based on the way the problems are presented to them. Such framing effect poses a major threat to the quality of decision-making, which can be very costly for organizations. Moreover, managers would be susceptible to fall prey to the framing bias and deviate from rational decision-making in uncertain situations. The study accounts for the characteristics of decision makers in the Middle East context rather than typically Western oriented contexts. In particular, the role of decision makers’ risk propensity and domain-specific expertise in occurrence of framing effect is mainly neglected in prior research. Also, the ability of decision makers to evaluate risk and return central to the framing effect depends on their expertise concerning the duration of time they have spent in fulfilling a task or decision-specific requirements. The study suggests that cultural characteristics of low-to-moderate uncertainty avoidance in a Middle Eastern setting are strongly susceptible to framing effect. In the context of Iranian healthcare providers, decision makers with high dispositional risk-taking propensity are less prone to the framing bias. As it is important for physicians to avoid framing bias, inclusion of relevant debiasing strategies in medical education curriculum and diversified decision makers such as varied knowledge, cognitions and risk attitudes of decision makers would reduce cognitive vulnerabilities and improve the quality medical decisions.
Dr Gama and her colleagues attempt to examine political campaign financing using other people’s money as an agency problem in the context of listed firms in Brazil. Agency problems occur when managers pursue personal benefits at the expense of shareholders. This may lead to distorted allocation of resources that can be exacerbated by unreported earnings and expenses in terms of informational asymmetry between shareholders and managers. Since political connections can affect earning quality, good governance practices will reduce the agency-related conflicts caused by the political behaviour of firms. Some agency conflict mechanisms underlying the political connections of firms include campaign donations, a former politician on the board of directors, lobbying and personal ties. The study examines the political contributions to electoral campaigns in Brazil. Corporate governance mechanisms can help general managers to reduce the deleterious effect of political connections on earning quality. The study highlights that governance mechanisms promote transparency in accounting practices in that accountable effects of campaign donations on the firm’s earnings, and clearly reported earnings, and expenses can enhance transparent behaviour of politically connected firms.
Finally, Professor Thomas Hemphill provides an incisive book review on Prediction Machines: The Simple Economics of Artificial Intelligence by Ajay Agrawal, Joshua Gans and Avi Goldfarb (2018). This book approaches artificial intelligence (AI) from the perspective of microeconomics in terms of trade-offs necessary to employ the benefits of AI in companies, by government and in society. Advances in AI facilitate inexpensive predictions employing Internet-generated data with less need for humans to specify the model in standard regular data as opposed to rare events. Humans have distinct strengths over machines at predicting managerial decisions regarding mergers, innovation and strategic alliances without data on similar company situations. Given information limitations, managers make decisions that are ‘good enough’. The authors explain the decomposition process in which managers have to be clear about training, input and feedback data. This decomposing process may lead to certain tasks performed by humans to be automated and generate new tasks for prediction. As prediction machines reduce uncertainty, they increase the ability to write contracts for both capital equipment and labour focussing on data, prediction and action. But managers need to be aware of how predictions differ across groups of people and their causal relationships. Although prediction machines demonstrate promising economic gains from optimization and automation, general managers need to better understand the potential of AI applications while assess various trade-offs related to privacy, computational cost, misuse and abuse of AI and managerial skills for handling complex situations.